Important Risk Management Learnings from White Bear V3 ~ Part 2 - Forex automated trading that even beginners can win - Navi+ - GogoJungle | Auto Trading - Market Analysis

Continuing from last time, we introduce risk management by learning from the drawdown of WhiteBearV3 (Part 2).

The article for Part 1 is here↓↓↓

In 2014, the market favored WhiteBearV3, but in 2015 it suffered a drawdown large enough to wipe out the previous profits.

From July 2015, I started operating V3, and I began trading right at the moment where the losses in the above image started.

Naturally, the performance was negative. However,in actual trading, the losses were reduced to about 1/3 of 2015’s total loss.

That is simply because “I had stopped the EA.”

The image above shows V3’s forward-test results, and2015 saw large drawdowns in July, August, and December.

And a total loss of 1167 pipswas incurred.

In fact, I only endured 312 pips of that loss.

When the drawdown hit at the end of July, there was the yuan issue in China, and although there was not any major market movement at that moment (Did China manipulate its own currency’s price??), I felt something “unusual” about market movement due to this drawdown.

I stopped the EA afterward. (After the end of July drawdown)

Two weeks later in August, there was another major drawdown according to the official results, but since I had stopped the EA, I did not incur that loss.

And the maximum drawdown for 2015 occurred in December at year-end.Normally, scalping EAs are prone to drawdowns at year-end, so I stopped the EA from early December.

In 2015, I felt that the euro-dollar market movement was particularly strange, so I decided to stop V3 early.

(Reference) Reasons to stop trading at the year-end↓↓↓

http://サラリーマン投資自動売買.com/fx-beginner/trade-dec-stop/

So, in the endV3 updated its maximum drawdown in July, August, and December, but I managed to limit it to only July’s drawdown.

In this way,even for scalping EAs that show large drawdowns in official results, if you respond to market fluctuations appropriately,you can ultimately turn the results into profit.

However, in this case, since I started operating V3 in July 2015, the result could not be positive….If I had started operating it from 2014, I think I could have ended 2015 with a positive overall result.

The lessons learned from this include

・No matter how good an EA has performed so far, do not become overconfident.

・Consider whether your funds can endure during consecutive maximum drawdowns.

・Check what kind of risk management design the EA has.

・Operate multiple different-types of EAs to manage risk.

etc.

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